In open-chested (Group I) and closed-chested (Group II) dogs, the authors examined the effects of the application of regional and whole-lung PEEP (10 torr) on the partitioning of electromagnetically measured blood flow between a normoxic and a hypoxic compartment of the lung. In both Group I and Group II when the left lower lobe (LLL) was made the hypoxic compartment 1, by ventilation with nitrogen, 95 per cent, CO 2, 5 per cent, and 2, by causing complete absorption atelectasis, LLL blood flow-to-total pulmonary blood flow ratio (Q(LLL)/Q(t) decreased 32-56 per cent. PEEP to the normoxic compartment (rest of the lung) during LLL hypoxia increased Q(LLL)/Q(t) significantly in both Group I (from 12 ± 2 to 35 ± 7 per cent) and Group II (from 8 ± 1 to 11 ± 1 per cent), but the increase was much greater in Group I, and transmural pulmonary arterial pressure increased significantly (6 ± 1 torr) in Group I only. PEEP to both the hypoxic LLL and the normoxic rest of the lung increased Q(LLL)/Q(t) significantly in Group I only (from 12 ± 2 to 19 ± 4 per cent) and transmural pulmonary arterial pressure increased significantly (7 ± 1 torr) in Group I only. PEEP to just the hypoxic LLL decreased Q(LLL)/Q(t) significantly in both Group I (from 12 ± 2 to 7 ± 1 per cent) and Group II (from 8 ± 1 to 5 ± 0.4 per cent). It is concluded that, in addition to the usual increase in regional functional residual capacity, the effect of PEEP on diseased lung is a summation of its beneficial and deleterious regional effects on the partitioning of blood flow between hypoxic and normoxic compartments of the lung.